In The Middle East: More Work, Less Pay For Investment Bankers

Investment bankers in the Middle East will be looking at 2013 with mixed feelings.

On the one hand, total revenues declined 4.4% on year, which some advisors attribute to the lack of sufficient large and profitable deals in the region. However, the lower revenues generated by investment banks in the Middle East don’t reflect a tentative recovery in initial public offerings, while the total value of mergers and acquisitions has also risen.

Mideast revenues fell to $699 million from $731 million in 2012 and is still only roughly half of what investment banks in the region made in pre-crisis 2007, according to data provided by Dealogic.

Mideast Investment Banking Revenues:

Year Revenues ($million) Year Revenues ($million)

2007 1,412 2011 564

2008 861 2012 731

2009 818 2013 699

2010 622

- Dealogic data

Bankers say the lower fees are a sign of the intense competition among advisers – both local and international. In addition, big consultancy and boutique firms also compete for mandates, further undercutting prices.

Illustrating this trend is syndicated lending: despite a rise in volumes and deal value, revenues plunged to $200 million from $310 million in 2012.

By contrast, income from equity capital and debt capital markets netted the advisers $148 million and $194 million, a marked improvement in comparison to 2012.

M&A data, meanwhile, show the number of deals fell by nearly a quarter but their total value rose 20%. That is mostly due to the completion of some large-scale transactions including the $5.3 billion purchase of a 53%-stake in Maroc Telecom by U.A.E. telecom company Etisalat and the domestic merger between an Abu Dhabi and Dubai aluminum maker.

“On the M&A advisory side, revenue conditions will remain below par compared to other G7 markets, as deal flow remains sporadic and fee levels uninteresting,” said Ashok Aram, chief executive for Deutsche Bank in the Middle East and North Africa.

Most bankers say the outlook on the equity capital markets is more promising. A number of Gulf companies, including Al Noor Hospitals and real estate firm Damac earlier this year sold shares in London, possibly paving the way for others to follow suit.

“In the Middle East and North Africa, while the debt markets have stayed robust, primary equity markets have only picked up recently as issuers contemplate options on the back of a broad market recovery, so 2014 will be more active,” Mr. Aram said.

Deutsche Bank in 2013 topped the league table for revenues ahead of HSBC and J.P.Morgan, according to Dealogic data.